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deficiency determinations resulted from petitioners’ alleged
failure to report HRDC’s income from the extras and certain other
sales, as well as petitioners’ unreported bank deposits. For
1994, respondent determined that petitioners received unreported
income from HRDC of $222,735. Respondent also reduced
petitioners’ reported 1994 rental income by $23,241. The parties
have stipulated that petitioners received $64,000 in unreported
income from HRDC in 1993, and petitioners conceded that in
addition unreported taxable deposits of $3,681 were made into
petitioners’ bank account in 1993. The parties have also
stipulated that petitioners received $42,335 in unreported income
from HRDC in 1995, and, in addition, unreported deposits of
$30,953.94 were made into petitioners’ bank account in 1995. The
parties dispute, inter alia, whether petitioners underreported
their 1994 income and whether the unreported bank deposits in
1995 were taxable.
OPINION
I. Burden of Proof
The parties do not address the burden of proof.
Respondent’s revenue agent first met with petitioners in late
1997 after the start of his examination of their 1993, 1994, and
1995 returns. Because respondent’s examination of petitioners’
returns began before July 22, 1998, section 7491 does not apply.
See Internal Revenue Service Restructuring and Reform Act of
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